UPDATED 4.02PM: The New Zealand Union of Students Association says changes are needed to the overseas loan repayment system.

Acting president Laura Harris said frightening messages are being signalled to borrowers, in the wake of an arrest of a student debtor at the border. 

MORE: 'Bludging students' rhetoric unhelpful

Ngatokotoru Puna, a nephew of the Cook Islands Prime Minister, from a respected family of politicians and lawyers, had been living overseas for 12 years and was seized at the airport on Monday over a $130,000 debt. 

He has now repaid $5000.

"I certainly think it's highlighted some of the flaws in the overseas student loan scheme, which make it very hard for students on lower incomes overseas to make repayments on those larger student loan debts," Harris said. 

"We should be encouraging students to repay them, and not using fear tactics and harsh penalties for those that haven't been able to."

Labour's education spokesperson Chris Hipkins said it would make more sense to deal with the steep costs of tertiary education.

"I think we need to be thinking longer term, in larger numbers, and actually doing something that will benefit the whole country, rather than one at a time trying to chase them up and being punitive towards those individuals."

"Student fees go up every year," he added. The average student loan goes up year after year - this is an unsustainable situation."

However, the Tertiary Education Minister said it's only fair that those with student loans repay them.

Steven Joyce described student loans as "money that taxpayers have advanced to these people for their education. They've gone off overseas and in many cases made successes of themselves, so it's only fair they repay the money."

Joyce said Puna's arrest was only a matter of time.

"It's been known for some time that if people continually ignore the requests of the IRD to make contact, and make arrangements to start paying off the student loan while they're overseas, it is possible they will be picked up at the border on their return."

ACT leader David Seymour said other students have to pay back their loans, so it's only fair that everyone does.

"We all know from when we're tiny, small, young that if you borrow something you're obliged to give it back eventually."

Seymour said those defaulting on their loans are taking their advantages for granted.

"Places like Afghanistan, where young girls can't even get primary school education, and we've got people whinging and whining that they have to pay for one quarter of the cost of a high quality tertiary education."